British Gas latest increase!!

wrf12345

The thing with BG, they will increase DD's even when you have a credit balance, they exaggerate the increase needed to increase their cash flow... and you have to phone up customers services every three months to stop them putting up the DD. The solution is variable direct debit or even prepayment meter but BT don't do the former for those on their "new" accounting system and not sure if they are capable of turning a smart meter into a prepayment meter, either. The other solution is to move providers. For pensioners who used to top up the account in November with their WFA, they may well find themselves having to increase the DD but I doubt if BG's accounting system is able to factor this into their DD calculations - yet!

pfpf

feel a bit sorry for the OP on this one. of course everyone is right about the £/DD but having only signed up to their tariff in July and having been away a few weeks i don't see how so much could have changed in 6 - 8 weeks for BG to already have decided their initial best guess now has doubled.

of course whats used has to be paid for and probably better to up the DD now rather than a huge bill later.

BarelySentientAI

pseudodox said:

Why should people be taken by surprise if they pay MVDD and get higher bills in winter?  We live in a country where generally speaking it is cold in winter, warm in summer & mild in autumn/spring.  Are these people also surprised every year when Christmas Day arrives on 25th December?   I enjoy LOWER bills in summer & get NORMAL ones in winter.  The summer ones leave me with more money to cover my other bills due from June to September like car/house insurance, road tax, boiler servicing, holidays & ice cream.

Back when the meter reader came round 4 times a year we all paid quarterly bills for the energy we had actually used.  Monthly bills do make more sense now - better cash flow for suppliers and consumers - and so much easier to administer with modern technology & online banking/DDs instead of posting off a cheque or visiting a showroom to pay cash.  But people should have the option to manage their own money, whether that be MVDD or FDD.  How many more times are there going to be posts that see FDD as "all you can eat".  We are developing a Nanny State instead of teaching people to take responsibility for themselves.

You have met the general public?  Some of them seem surprised that the sky is up.  They probably do wonder why Christmas Day is on 25 each year and not always on a Sunday.

There is nothing stopping people paying monthly in full when the bill arrives.

You can't complain about a nanny state in one breath and then argue that the regulator should set how I should pay my bill unless deemed trustworthy to do otherwise in the next.

I thought we had moved past the "they should just grow up and learn to budget" stage of the discussion.

Ildhund

BarelySentientAI said:

There is nothing stopping people paying monthly in full when the bill arrives.

... except a £120 annual premium - £10 a month for the privilege. 

[Difference between the cost of average consumption of gas and electricity for a medium-usage household, monthly DD vs. payment on receipt of bill]

BarelySentientAI

Ildhund said:

BarelySentientAI said:

There is nothing stopping people paying monthly in full when the bill arrives.

... except a £120 annual premium - £10 a month for the privilege. 

[Difference between the cost of average consumption of gas and electricity for a medium-usage household, monthly DD vs. payment on receipt of bill]

You want the responsibility and option of how to manage your own money, that is part of it.

There is no reason why different billing methods with different risk profiles and different operating costs should not be charged differently.  (I'd do it as a representative fixed cost, but everyone already goes mad about those).

Less of mandating this and forcing that.  Companies set their offers, customers take their choice.

Scot_39

There are literally millions of people on low and fairly fixed incomes - not just those on meagre pensions / benefits - but also working at or close to minimum wage - with virtually little in the way of savings / financial resilience - who could struggle to cope with the higher bills over several months in winter.   Especially those who aren't financially disciplined / good at budgetting.

For them MVDD arguably should never be a default choice.

And as to mandating suppliers MVDD - whilst I can see why many like the idea - playing devils advocate...

Couldn't MVDD be seen as increasing suppliers costs.

By leading to essentially negative cash flow in a sense - it always works in arrears - you use - you get bill - they take the cash. Arguably pretty much only a slightly smaller delay if standard credit applied monthly - which I believe some suppliers are shifting quarterly to monthly. 

And in operational financing terms - remember the fuss in media about how much of our cash they all held and ringfencing or not. Compared to positive balance biased annualised plans (still AFAIK not completely ringfenced from suppliers operational financing) MVDD strips that capital to zero..  This time last year press were talking c£8bn - think of cost of financing a significant proportion of that in the market instead - that then being added to bills. But a more recent Ofgem Customer Credit Balance (CCB) c Mar 2024 - was charting a lower c£3.7bn annual average / £5bn peak - for domestic DD - peaking just over £5bn in Q3. And average annual per customer balance of over £250 - peaking over £300 in Q3. How much they can still put into use - after Ofgem changes - not sure. But if borrowed instead a financing cost (as an ex  at 5% £200 would for instance = £10 - not dissimilar to levels Ofgem tinkering around (Covid special - say £11 etc).

 

If my very simplistic logic correct - surely then arguably a commercial decision therefore whether MVDD can therefore be offered at the same discounted DD rates relative to standard credit. 

And certainly an argument MVDD at same rates as DD - attracting some small cross subsidy - from annualised plans.

People do however clearly need to be far better educated on what each of the options mean when available.  

GingerTim

pfpf said:

feel a bit sorry for the OP on this one. of course everyone is right about the £/DD but having only signed up to their tariff in July and having been away a few weeks i don't see how so much could have changed in 6 - 8 weeks for BG to already have decided their initial best guess now has doubled.

of course whats used has to be paid for and probably better to up the DD now rather than a huge bill later.

I think that depends on what the OP put as their estimated usage when the joined BG - if it was unrealistically low or a payment estimate based on a previous fixed tariff, then I can see this easily happening.

Gerry1

We've all suffered because of the low take up of Variable DDs.  Many companies used inflated Fixed DDs to boost their cashflow instead of buying sufficient supplies in advance.

When the Russian invasion sent wholesale prices rocketing they couldn't make ends meet by buying on the spot market, around 30 companies going bust because they couldn't repay their customers' large credit balances.  Thousands of people also lost their jobs.

Ofgem bailed out their customers and virtually everyone had to pay surcharges as a consequence of Ofgem's poor performance.

Fixed DDs were helpful to many people back in the day when most users were on fixed tariffs and the price cap was of very little relevance to most users; it was set quite high to limit how much little old ladies who had never switched from their original Gas Board supplier could be ripped off.

Fixed DDs are outdated in today's conditions and often mean that higher consumption isn't spotted in good time, only long after the damage has been done and there's a big and unexpected hike in the FDD.

No other commodity uses this Fixed-But-Not-Fixed business model.  We all accept that at Christmas the petrol bills will be higher if you drive to see distant relatives and friends, ditto the credit card bills if you have a feast with lots of booze and presents.

Why should energy be the odd one out?  FDD should still be available for those who can't budget, but it shouldn't be the default or only option.

pseudodox

I pay by MVDD.  I give a reading on the 1st of the month.  I get a bill within 24 hours which is the actual cost of the energy I have used.  The supplier takes the full amount by DD 14 days later.  Absolute minimum administration on their part.  They are guaranteed that every penny they take from me is theirs to keep.  Forever. They are not in a position where I will be contacting CS, taking up staff time & communication costs, arguing for a reduction in my DD, demanding a refund of surplus credit (which will cost them transacation fees), and incurring costs in their accounting system which has to keep records on the balance sheet of monies that may have to be returned to customers.  Such admin is no less onerous than managing control on the balance sheet of bad debts.

Any business which issues an invoice for goods/services which gets paid in full on the agreed terms (like 14 days, 30 days etc) without them chasing, sending reminders etc has minimal costs for that transaction.  Been there, done that.

This works for ME because I can mange my own finances.  It works for many people.  It does not work for EVERYONE but just because some cannot/will not manage their own money effciently why should I deemed to also be less than capable?  We are all individuals, we are not clones.  The FDD system helps many people to stay on top of their outgoings, but I wonder what the percentage is of the population as a whole, compared to that of the minority of said population we see on this forum, who are in difficulties/lack understanding in spite of the FDD system.  Many don't understand what they are paying, why they are paying it and what relation it has to their actual energy usage.

If taking customers money upfront for potential energy usage why did so many suppliers go bump if this is a good cashflow model?  Was it because despite having a pot of money clawed into their system they could not pay their own bills?  They bought energy cheap, to sell it cheap.  But had they actually paid for that cheap energy from their wholesale supplier that they now expected their customers to pay up front for?  

Electricity, gas and water are for all practical purposes essentials of a modern civilised society.  Why then has there been so much mucking about with the way they are administered.  Who has benefitted apart from the fat cat CEOs and the shareholders?

Qyburn

Scot_39 said:

There are literally millions of people on low and fairly fixed incomes - not just those on meagre pensions / benefits - but also working at or close to minimum wage - with virtually little in the way of savings / financial resilience - who could struggle to cope with the higher bills over several months in winter. 

There are lots who don't have the luxury of mains gas and have to pay for their fuel in advance and in bulk. In some cases that might be buying a whole Winter's supply in one go.